Advanced Tactical Ordnance Sys., LLC v. Real Action Paintball, Inc.

• Decision Date: 22 July 2014
• Docket Number: No. 13–3005.,13–3005.
• Citation: 751 F.3d 796
• Parties: ADVANCED TACTICAL ORDNANCE SYSTEMS, LLC, Plaintiff–Appellee, v. REAL ACTION PAINTBALL, INC., and K.T. Tran, Defendants–Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

751 F.3d 796

ADVANCED TACTICAL ORDNANCE SYSTEMS, LLC, Plaintiff–Appellee,

v.REAL ACTION PAINTBALL, INC., and K.T. Tran, Defendants–Appellants.

No. 13–3005.

United States Court of Appeals, Seventh Circuit.

Argued Jan. 7, 2014.

Decided May 9, 2014.

As Corrected May 12, 2014.

Rehearing and Rehearing En Banc Denied July 22, 2014.

Michael L. Blumenthal, Attorney, Milton M. Blumenthal & Associates, Chicago, IL, for Plaintiff–Appellee.

Paul B. Overhauser, Attorney, Overhauser Law Offices LLC, Greenfield, IN, for Defendants–Appellants.

Before WOOD, Chief Judge, and POSNER and KANNE, Circuit Judges.

WOOD, Chief Judge.

Some readers of our opinions may be familiar with paintball, a type of war game in which the players shoot charges of paint at one another. Paintballs, it turns out, are not the only kind of nonlethal projectile that can be used in this way. Our case concerns a more serious product, known to Advanced Tactical Ordnance Systems (Advanced Tactical) by the name PepperBall (a ball filled with a pepper-spray-like irritant). Police departments, private security firms, and comparable organizations are the primary consumers of these items. This is a trademark infringement action, brought by Advanced Tactical against a company that calls itself Real Action Paintball, Inc., and its president, K.T. Tran. (We refer to both as Real Action, because there is no material difference between the company and its president for purposes of this appeal.) Although the parties have focused in their briefs on the preliminary injunction the district court granted, we have a more fundamental problem with the case. We conclude that the district court lacked personal jurisdiction over defendant Real Action, which preserved its objection on this point. We therefore reverse and remand with directions to dismiss on that basis.

I

Advanced Tactical manufactures and sells PepperBall branded items, including PepperBall projectile irritants. Its headquarters is allegedly in Indiana, though that is less clear than it might be—the company appears to have at least one office in California. It became the manufacturer and seller of PepperBall-branded items in 2012 after it acquired trademarks and other property in a foreclosure sale from a company called PepperBall Technologies Inc. PepperBall Technologies Inc. was located in California. Before the foreclosure, PepperBall Technologies had purchased its irritant projectiles from at least two sources: Perfect Circle, half owner of Advanced Tactical, and a Mexican company called APON. After Advanced Tactical acquired PepperBall Technologies, APON ceased its work as an assembler or manufacturer for PepperBall projectiles.

Around the time of foreclosure, APON's chief operating officer, Conrad Sun, a citizen of California, contacted Real Action Paintball Inc., a California company, to see if Real Action was interested in acquiring irritant projectiles from APON. The answer was yes. The parties concluded their deal in August 2012, after which Real Action posted on its website and sent through its email list an announcement that it had acquired the “machinery, recipes, and materials once used by PepperBall Technologies Inc.” That announcement is central to the merits, because it arguably implied that after PepperBall Technologies ceased to exist, Real Action was the only maker of PepperBall irritant projectiles.

Advanced Tactical soon caught wind of Real Action's announcement and fired off a cease-and-desist letter. In response, Real Action added a disclaimer to the original message, stating that it was neither associated nor affiliated with PepperBall Technologies and its brands, and that Real Action projectiles were not made by the current PepperBall Technologies (the name under which Advanced Tactical was doing business). Unsatisfied, Advanced Tactical filed this suit in the District Court for the Northern District of Indiana. It offered a number of different theories of recovery, including intentional violations of the Lanham Act, 15 U.S.C. § 1111 et seq., common law trademark infringement and unfair competition, trade dress infringement, and misappropriation of trade secrets.

The complaint alleged that personal jurisdiction was proper under Indiana's long-arm statute, which is found in Trial Rule 4.4(A). Each defendant, it asserted, engaged in conduct satisfying one or more of the following: doing any business in Indiana, via an interactive website capable of accepting orders from citizens of Indiana (Rule 4.4(A)(1)); engaging in tortious acts outside Indiana while knowing they would harm citizens of Indiana (Rule 4.4(A)(3)); causing damage in Indiana while deriving substantial revenue from goods sold in Indiana (same); and conspiring to engage in tortious conduct calculated to harm a citizen of Indiana (same). Real Action contested personal jurisdiction. In response to the district court's query why Indiana was proper and why California was not preferable, Advanced Tactical pointed to the “blast email” that Real Action sent to all of its customers, “many of whom are located here in the state of Illinois. I mean, state of Indiana.” Advanced Tactical also noted that Real Action regularly emailed customers or potential customers from all over the United States, including Indiana, and that it had made at least one sale to an Indiana resident.

The district court decided that the parties needed more time to look into the question. It held an evidentiary hearing on the matter on December 7, 2012, after which it concluded that personal jurisdiction was proper and that Advanced Tactical was entitled to a preliminary injunction. Real Action has appealed, as it is entitled to do under 28 U.S.C. § 1292(a)(1), contesting both the personal jurisdiction ruling and the injunctive relief.

II

The plaintiff bears the burden of establishing personal jurisdiction. N. Grain Mktg., LLC v. Greving, 743 F.3d 487, 491 (7th Cir.2014) (citing Purdue Res. Found. v. Sanofi–Synthelabo, S.A., 338 F.3d 773, 782 (7th Cir.2003)). When the district court holds an evidentiary hearing to determine personal jurisdiction, as it did here, “the plaintiff must establish jurisdiction by a preponderance of the evidence.” Purdue, 338 F.3d at 782 (citing Hyatt Int'l Corp. v. Coco, 302 F.3d 707, 713 (7th Cir.2002)). Advanced Tactical, however, urges first that the question of personal jurisdiction is not properly before us on this interlocutory appeal; Real Action responds that we can reach it through pendant appellate jurisdiction. Both parties are wrong; this court is entitled to entertain a threshold non-merits question, such as personal jurisdiction, at the outset of a case. See Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 584, 119 S.Ct. 1563, 143 L.Ed.2d 760 (1999) (“Personal jurisdiction ... is an essential element of district court jurisdiction, without which the court is powerless to proceed to an adjudication.”). Although personal jurisdiction is the kind of limitation that is waivable, that is of no moment in a case like this one, in which the objection has been fully aired.

In order for the district court's preliminary injunction to be valid, that court had to have personal jurisdiction over the defendant. Accord e360 Insight v. The Spamhaus Project, 500 F.3d 594, 598 (7th Cir.2007) ( “Default judgments rendered without personal jurisdiction are void and, therefore, we shall ‘set aside a default judgment as a per se abuse of discretion if the district court that entered the judgment lacked jurisdiction.’ ”) (citing Swaim v. Moltan Co., 73 F.3d 711, 716 (7th Cir.1996)). Indeed, as both parties seem to acknowledge, our decision in Indianapolis Colts, Inc. v. Metro. Balt. Football Club Ltd. P'ship, 34 F.3d 410 (7th Cir.1994), is precisely on point. There we reviewed a preliminary injunction, and the main argument concerned personal jurisdiction. We therefore proceed to that issue.

III

This case involves claims under both federal law (the Lanham Act) and state law, and so the district court's jurisdiction rested on a federal question, 28 U.S.C. § 1331, and supplemental jurisdiction, 28 U.S.C. § 1367. Because the Lanham Act does not have a special federal rule for personal jurisdiction, however, we look to the law of the forum for the governing rule. See Fed.R.Civ.P. 4(k)(1)(A); Daimler AG v. Bauman, ––– U.S. ––––, 134 S.Ct. 746, 753, 187 L.Ed.2d 624 (2014). Under Indiana's long-arm statute, Indiana state courts may exercise personal jurisdiction on a number of prescribed bases, as well as “on any basis not inconsistent with the Constitution of this state or the United States.” Ind. R. Trial P. 4.4(A). The Supreme Court of Indiana has held that Indiana's long-arm provision “reduce [s] analysis of personal jurisdiction to the issue of whether the exercise of personal jurisdiction is consistent with the Federal Due Process Clause.” LinkAmerica Corp. v. Cox, 857 N.E.2d 961, 967 (Ind.2006). Thus, to determine whether the district court had personal jurisdiction over Real Action, we ask whether “the exercise of jurisdiction comports with the limits imposed by federal due process.” Walden v. Fiore, ––– U.S. ––––, 134 S.Ct. 1115, 1121, 188 L.Ed.2d 12 (2014) (internal quotation marks omitted).

In Daimler, the Court confirmed its adherence to the distinction between “general jurisdiction” and “specific jurisdiction.” The former is proper only in the limited number of fora in which the defendant can be said to be “at home.” For a corporation, such places include the state of incorporation and the state of the principal place of business. Specific jurisdiction is available for a suit that arises out of the forum-related activity. Advanced Tactical concedes that it cannot rely on general jurisdiction; it must prove specific jurisdiction or face dismissal. We thus confine the discussion that follows to the law governing specific jurisdiction.

Nearly 70 years ago, the Supreme Court held that due process is satisfied for this purpose so...